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Under the Dome - May 28, 2013

Day 95 ends with another dead tax plan

Five days after what should have been the end of a regular legislative session and 15 days after the end of the 80 day session promised by legislative leadership back in January, both chambers have closed up for the day no closer to agreement on taxes or a budget.

Thanks to the reckless tax cut bill of 2012, Governor Brownback has called for breaking a legislative promise to the people of Kansas by permanently increasing the sales tax. He needs that money to pay for the income tax cuts passed last year.

The Senate tried going along with the Governor and passed a tax bill setting the sales tax rate permanently at 6.3% (it is scheduled to go back to 5.7% in 2014), and further reducing income tax rates by finding other "pay fors" - completely phasing out income tax deductions and decreasing the standard deduction. The only break taxpayers got in the Senate bill was a reduction to 4.95% in the sales tax on food. While that bill passed the Senate, it was soundly defeated in the House where it got fewer than ten votes.

So today, the House ran its own tax bill. This one also reduced income tax rates and paid for them by trimming deductions by 50% and decreasing the standard deduction. The sales tax rate proposed in the House bill was 6% with no reduction for food purchases. House Tax Chairman Richard Carlson carried the bill on the floor but it too went down to defeat on a vote of 42 to 71.

The Senate then came in and, sounding somewhat befuddled, Majority Leader Terry Bruce announced the failure of the tax bill in the House and said he expected the tax conference committee would probably meet some time tomorrow to figure things out. The Senate then adjourned.

So what do we know? While the Senate was willing to go along with the Governor, the House has no appetite for reneging on a promise to taxpayers made when the sales tax was temporarily increased in the height of the great recession. They rejected a 6.3% rate and they rejected a 6% rate. They might also be hesitant to reduce or eliminate the home mortgage interest deduction and the deduction for property taxes paid. They might also not want to slash the standard deduction which they had just raised last year.

We also know that this puts all budget plans in limbo. No matter how they slice it, it's going to be tough to fund state services while they keep shrinking revenue. There can't be any resolution to the budget stalemate until they know how much revenue they might have.

In the meantime, each day of overtime costs taxpayers roughly $45,000. The tax and budget stalemate will have eaten up about a quarter of a million taxpayer dollars by the end of tomorrow, day 96.

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